FDI in High-Tech: Innovation and Growth in The United States

February 5, 2020

Kara Mazachek is an Economic Research Analyst at SelectUSA

Following SelectUSA’s participation in the Consumer Electronics Show (CES), it is the optimal time to look at how foreign direct investment (FDI) in high technology, or high-tech, supports innovation and growth in the United States.

What is high-tech?SelectUSA defines the high-tech sector as an industry that relies on a skilled and educated workforce, acts as an innovative producer in our economy, and creates and utilizes advanced technologies. Perhaps unsurprisingly, the high-tech sector’s share of workers in science, technology, engineering, and mathematics (STEM) occupations is more than twice that of the national average.

This industry is quite large and growing consistently, according to data from the Bureau of Economic Analysis (BEA). In 2018, high-tech companies contributed $8.3 trillion of economic value in the United States, accounting for nearly 23 percent of U.S. gross domestic product (GDP). Additionally, high-tech companies employ approximately 20 million U.S. workers. The U.S. high-tech industry also continues to grow, especially in fields such as the data processing, hosting, and related services sub-industry, which had a compound annual growth rate (CAGR) of 57.9 percent from 2013 to 2018.

How has FDI impacted the U.S. high-tech sector?FDI supports the high-tech industry in the United States and helps it thrive. Specifically, the inward position of FDI in the U.S. high-tech sector was $2.0 trillion in 2018. That’s 46 percent of total FDI in the United States! It also steadily continues to grow: the five-year CAGR for FDI in the high-tech sector was 10.1 percent between 2013 and 2018. This growth is faster than the comparable all-industry FDI CAGR average of 9.8 percent.

The United States sees tangible results from high-tech FDI. According to BEA, foreign-owned companies in high-tech industries have steadily increased their annual U.S. research and development (R&D) spending over recent years to $48.7 billion in 2017. High-tech FDI also accounted for $169.5 billion of total U.S. goods exports in 2017. Additionally, foreign-owned U.S. affiliates in the high-tech sector directly supported more than 2.1 million U.S. jobs in 2017.

So, what does this mean for the high-tech sector?All these data points further confirm that high-tech investment are important drivers of growth for the U.S. economy. As FDI into this sector continues to grow, the United States will see advanced innovation, continue to employ millions of highly skilled and educated workers, and further the competitiveness of our high-tech sector. To maintain success in high-tech and all other sectors, SelectUSA will continue to help global business investors and U.S. economic developers to succeed in the U.S. economy.

About SelectUSAHoused within the U.S. Department of Commerce’s International Trade Administration, SelectUSA promotes and facilitates business investment in the United States. To learn more about SelectUSA’s services, the U.S. business and investment climate, and how FDI benefits the U.S. economy, visit selectusa.gov and follow @SelectUSA on Twitter.